Somerset Hills Bancorp Reports 2012 Fourth Quarter and Higher Full-Year Earnings

Somerset Hills Bancorp Reports 2012 Fourth Quarter and Higher Full-Year
Earnings

BERNARDSVILLE, N.J., Jan. 24, 2013 (GLOBE NEWSWIRE) -- Somerset Hills Bancorp
(Nasdaq:SOMH) (the "Company"), parent company of Somerset Hills Bank (the
"Bank"), today reported full-year net income of $3.4 million for 2012, a 20.1%
increase over the $2.8 million earned in 2011. On a fully diluted per share
basis, net income was $0.63 per share for 2012 and $0.52 per share for 2011.
For the fourth quarter of 2012, the Company earned $844,000, representing a
2.7% increase from 2011 fourth quarter net income of $822,000. Diluted
earnings per share amounted to $0.16 in the fourth quarter of both 2012 and
2011.

Stewart E. McClure, Jr., President and CEO, noted, "The Company reported
another quarter of good financial results despite a continuing difficult
operating environment for banks that has been marked by high levels of
unemployment and weak real estate valuations. Both the Company's and the
banking industry's net interest margins continue to be under duress as longer
term assets reprice at increasingly lower levels as a result of the lingering
low interest rate environment. Ourcredit quality remains strong as nonaccrual
loans were 0.31% of total loans at the end of 2012.In addition, our cost
containment efforts have been instrumental in the improvement in our
efficiency ratio to 61.9% for the year 2012, down from 66.8% for all of 2011."

Net Interest Income (Tax Equivalent Basis)

Fully taxable equivalent ("FTE") net interest income for 2012 was $12.1
million, up modestly, from the $12.0million earned in 2011.The slight
increase in net interest income during 2012 was primarily attributable to a
4.7% increase in average interest-earning assets to $334.0million in 2012
from $318.9million in 2011, which was partially offset by a 16 basis-point
decline in the net interest margin to 3.62% in 2012 from 3.78% in 2011. FTE
net interest income for the fourth quarter of 2012 totaled $2.9million, a
decline of $151,000, or 4.9%, from the $3.1million earned in the fourth
quarter of 2011. The decrease in FTE net interest income for the fourth
quarter of 2012 from the same quarter of 2011 was primarily due to a 20
basis-point narrowing of the net interest margin to 3.35% from 3.55% for the
fourth quarter of 2011.Growth in average interest earning assets of 1.1% in
the fourth quarter of 2012 to $346.7million over $342.8million for the
fourth quarter of 2011 served to partially offset the decline in net interest
income.Average total loans increased by 5.1% in the full-year comparison and
by 2.7% in the fourth-quarter comparison.

Non-Interest Income

Non-interest income increased to $2.8million for the year 2012 from
$2.0million for 2011.After excluding net securities gains realized in both
years and a nonrecurring, tax-free mortality gain recorded in 2011 of $267,000
on a bank-owned life insurance policy, adjusted non-interest income grew 36.0%
during 2012 to $2.3million over the $1.7million earned in 2011.An increase
in gains on sales of residential loans at Sullivan Financial Services, Inc.
("Sullivan") in 2012 to $1.4million from $786,000 in 2011 was the primary
factor contributing to the year-to-year growth in adjusted non-interest
income.For the fourth quarter of 2012, non-interest income amounted to
$1.0million, up from $503,000 earned in the fourth quarter of 2011.Excluding
net securities gains, adjusted non-interest income increased to $666,000, or
32.4% in the fourth quarter of 2012 from $503,000 earned in the fourth quarter
of 2011.This increase in adjusted non-interest income was primarily
attributable to increased origination volume and sales of residential loans at
Sullivan.The gains realized on the sales of investment securities in 2012
amounted to $500,000 and were undertaken by the Company as part of its ongoing
asset liability management strategy.

Non-Interest Expense

Non-interest expense declined to $9.3million for the year 2012 from
$9.6million for all of 2011, and increased to $2.5million in the fourth
quarter of 2012 from $2.3million in the same quarter of 2011. Included in
non-interest expense in the fourth quarter of 2012, in the third quarter of
2011 and the respective full-year periods were nonrecurring losses on the
early extinguishment of Federal Home Loan Bank borrowings of $334,000 in 2012
and $426,000 in 2011.Excluding these items, adjusted non-interest expense
decreased by $270,000 or 2.9% to $8.9million for the year 2012 from
$9.2million in the year 2011 and declined by $48,000 or 2.1% to $2.2million
for the fourth quarter of 2012 from $2.3million for the fourth quarter of
2011. The declines in operating expenses were primarily due to decreases in
personnel, occupancy and data processing expenses. Management continues to
aggressively manage its expense containment efforts, which have yielded cost
savings in many areas of the Company's operations.

Provision for Income Taxes

The Company recorded income tax provisions of $1.8million for the full-year
and $449,000 for the fourth quarter 2012, respectively, versus $1.2million
and $430,000 for the full-year and fourth quarter of 2011, respectively. The
effective tax rates were 35.1% and 34.7% for the year and fourth quarter of
2012, respectively and 29.7% and 34.3% for the year and fourth quarter of
2011, respectively. The increase in the effective tax rates for the year 2012
was due to an increase in revenue from taxable sources.

Asset Quality

The full-year provision for loan losses was $290,000 in 2012 versus $220,000
for the year 2011, and the fourth-quarter provision for loan losses was
$50,000 in 2012 versus $20,000 for the fourth quarter of 2011. Net
charge-offs of $114,000 and $113,000 were recorded in the year 2012 and 2011,
respectively. For the fourth quarter of 2012, net charge-offs totaled $59,000
compared to $5,000 for the same quarter of 2011. The allowance for loan
losses was $3.2million, or 1.31% of total loans, at December 31, 2012 and
$3.0million, or 1.28% of total loans, at December31, 2011.

Non-accrual loans at the end of 2012 amounted to $746,000, representing 0.31%
of total loans, and $146,000, or 0.06% of total loans at December31, 2011.
The non-performing asset ratio, which is defined as nonaccrual loans and OREO
as a percentage of total assets, was 0.20% at December31, 2012 and 0.04% at
December 31, 2011.The Company had no OREO at the end of both 2012 and 2011
and troubled debt restructured loans ("TDRs") were $340,000 and $344,000 at
December 31, 2012 and 2011, respectively. Loans past due 90days or more and
still accruing amounted to $420,000 at the end of 2012 compared with none at
year-end 2011.As of December 31, 2012, the Company had $216,000 in loans
delinquent 30 to 89 days, representing 0.09% of total loans, versus $875,000,
or 0.38%, of total loans at the end of 2011.

Financial Ratios

As of December 31, 2012, the Company's tangible common equity ratio and
tangible book value per share were 11.34% and $7.79, respectively.As of the
end of 2011, the Company's tangible common equity ratio and tangible book
value per share were 11.09% and $7.55, respectively.

Dividend Declaration

Based upon the Company's fourth quarter performance, the Board of Directors
declared a quarterly cash dividend of $0.08 per share payable February 28,
2013 to shareholders of record as of February14, 2013.

Forward-Looking Statements

This news release contains certain forward-looking statements which are based
on certain assumptions and describe future plans, strategies and expectations
of the Company. These forward-looking statements are generally identified by
use of the words "believe," "expect," "intend," "anticipate," "estimate,"
"project," or similar expressions. The Company's ability to predict results or
the actual effect of future plans or strategies is inherently uncertain.
Factors which could have a material adverse effect on the operations of the
Company and its subsidiaries include, but are not limited to, changes in
interest rates, general economic conditions, legislative/regulatory changes,
monetary and fiscal policies of the U.S. Government, including policies of the
U.S. Treasury and the Federal Reserve Board, the quality or composition of the
loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Company's market area and
accounting principles and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. The Company does not undertake, and
specifically disclaims any obligation, to publicly release the result of any
revisions which may be made to any forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.


SOMERSET HILLS BANCORP
Selected Consolidated Financial Data
(Unaudited)
                                                               
                           Quarter Ended December 31, Year Ended December 31,
($ in thousands, except per 2012          2011         2012        2011
share data)
Income Statement Data:                                          
Net interest income         $2,875      $3,020     $11,915   $11,847
Provision for loan losses   50           20          290        220
Net interest income after   2,825        3,000       11,625     11,627
loan loss provision
Non-interest income         1,005        503         2,848      2,002
Non-interest expense        2,537        2,251       9,265      9,627
Income before income taxes  1,293        1,252       5,208      4,002
Income tax expense          449          430         1,830      1,189
Net income                  $844        $822       $3,378    $2,813
Diluted earnings per share  $0.16       $0.16      $0.63     $0.52
Balance Sheet Data:                                             
At period end                                                   
Total assets                $368,930    $364,025              
Loans, net                  238,753      229,503                
Loans held for sale         6,977        2,969                  
Allowance for loan losses   3,158        2,982                  
Investment securities held  8,900        10,738                 
to maturity
Investment securities held  13,370       43,579                 
for sale
Deposits                    320,187      314,714                
Borrowings                  5,500        7,500                  
Shareholders' equity        41,848       40,369                 
Book value per share        7.79         7.55                   
Tangible common equity      11.34%        11.09%                  
ratio
Average for the period                                          
Loans                       $237,098    $230,915   $235,457  $223,937
Interest-earning assets     346,655      342,831     333,994    318,851
Total assets                366,695      364,120     354,435    339,582
Shareholders' equity        41,965       40,557      41,442     40,308
Diluted shares outstanding  5,380        5,395       5,371      5,459
(in thousands)
                                                               
Performance Ratios/Amounts:                                     
Return on average assets    0.92%         0.90%        0.95%       0.83%
Return on average equity    8.00%         8.04%        8.15%       6.98%
Fully taxable equivalent    3.35%         3.55%        3.62%       3.78%
net interest margin
Efficiency ratio            61.5%         63.0%        61.9%       66.8%
Fully taxable equivalent    $2,918      $3,069     $12,091   $12,044
net interest income
                                                               
Asset Quality:                                                  
Net charge-offs             $59         $5         $114      $113
(recoveries)
At period end                                                   
Nonaccrual loans            746          146                    
OREO property               --           --                     
Total nonperforming assets  746          146                    
Loans past due 90 days or   420          --                     
more and still accruing
Troubled debt restructured  340          344                    
loans
Loans past due 30 to 89     216          875                    
days and still accruing
Nonaccrual loans to total   0.31%         0.06%                   
loans
Nonperforming assets to     0.20%         0.04%                   
total assets
Allowance for loan losses   1.31%         1.28%                   
to total loans
Allowance as a % of         423%          2042%                   
nonperforming loans



SOMERSET HILLS BANCORP
Statement of Operations
(Dollars in thousands, except per share data)
(Unaudited)
                                                               
                          Quarter Ended December 31, Year Ended December 31,
                          2012          2011          2012        2011
INTEREST INCOME                                                 
                                                               
Loans, including fees      $2,841      $3,015      $11,775   $11,879
Investment securities      253          398          1,294      1,626
Interest bearing deposits  48           41           135        135
with other banks
Total interest income      3,142        3,454        13,204     13,640
                                                               
INTEREST EXPENSE                                                
Deposits                   205          367          1,029      1,450
Federal Home Loan Bank     62           67           260        343
advances
Total interest expense     267          434          1,289      1,793
                                                               
Net Interest Income        2,875        3,020        11,915     11,847
                                                               
PROVISION FOR LOAN LOSSES  50           20           290        220
                                                               
Net Interest Income after  2,825        3,000        11,625     11,627
Provisionfor Loan Losses
                                                               
NON-INTEREST INCOME                                             
Service fees on deposit    89           73           322        286
accounts
Gains on sales of mortgage 406          262          1,362      786
loans, net
Bank owned life insurance  67           73           270        555
Gain on sales of           339          --           500        9
investment securities, net
Other income               104          95           394        366
Total Non-Interest Income  1,005        503          2,848      2,002
                                                               
NON-INTEREST EXPENSE                                            
Salaries and employee      1,272        1,338        5,238      5,324
benefits
Occupancy expense          319          358          1,328      1,499
Advertising and business   30           29           119        129
promotions
Printing stationery and    25           24           134        128
supplies
Data processing            127          136          505        539
Loss on debt               334          --           334        426
extinguishment
Other operating expense    430          366          1,607      1,582
Total Non-Interest Expense 2,537        2,251        9,265      9,627
                                                               
Income before Provision    1,293        1,252        5,208      4,002
for Taxes
                                                               
PROVISION FOR INCOME TAXES 449          430          1,830      1,189
                                                               
Net income                 $844        $822        $3,378    $2,813
                                                               
Diluted earnings per       $0.16       $0.16       $0.63     $0.52
common share



SOMERSET HILLS BANCORP
Balance Sheets
(Dollars in thousands)
(Unaudited)
                                                                
                                                    December 31, December 31,
                                                    2012         2011
ASSETS                                                           
                                                                
Cash and due from banks                              $7,544     $4,588
Interest bearing deposits at other banks             75,902      55,411
Total cash and cash equivalents                      83,446      59,999
Loans held for sale                                  6,977       2,969
Investment securities held to maturity (Approximate  8,900       10,738
market valueof $9,186 in 2012 and $10,849 in 2011)
Investments available for sale                       13,370      43,579
Loans receivable                                     241,911     232,485
Less allowance for loan losses                       (3,158)     (2,982)
                                                                
Net loans receivable                                 238,753     229,503
                                                                
Premises and equipment, net                          4,868       4,996
Bank owned life insurance                            8,245       8,000
Accrued interest receivable                          1,036       1,168
Prepaid expenses                                     790         985
Other assets                                         2,545       2,088
                                                                
Total assets                                         $368,930   $364,025
                                                                
LIABILITIES AND STOCKHOLDERS' EQUITY                             
                                                                
LIABILITIES                                                      
Deposits:                                                        
Non-interest bearing deposits - demand               $87,279    $80,532
Interest bearing deposits                                        
NOW, money market and savings                        198,595     193,276
Certificates of deposit, under $100,000              17,716      20,875
Certificates of deposit, $100,000 and over           16,597      20,031
Total deposits                                       320,187     314,714
                                                                
Federal Home Loan Bank advances                      5,500       7,500
Other liabilities                                    1,395       1,442
                                                                
Total liabilities                                    327,082     323,656
                                                                
STOCKHOLDERS' EQUITY                                             
Preferred stock - 1,000,000 shares authorized, none  --          --
issued
Common stock - authorized 9,000,000 shares of no
par value; issued and outstanding, 5,369,673 shares  37,143      36,972
in 2012 and 5,344,648 shares in 2011
Retained earnings                                    4,333       2,608
Accumulated other comprehensive income               372         789
                                                                
Total stockholders' equity                           41,848      40,369
                                                                
Total liabilities and stockholders' equity           $368,930   $364,025

CONTACT: Stewart E. McClure, Jr.
         President & CEO
         908.630.5000
        
         Alfred J. Soles
         Executive VP & CFO
         908.630.5018
 
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